December 10, 2024
New Delhi, India
Rupee Weakens Amid Leadership Change at RBI
Rupee (INR) slipped to a record low of 84.80 on Tuesday, surpassing last week’s all-time low of 84.7575. The drop followed the announcement of Sanjay Malhotra as the new Governor of the Reserve Bank of India (RBI), sparking speculation about a shift towards accommodative monetary policy.
Market Response
- Dollar Strength: The US Dollar index edged higher, gaining 0.06% to 106.22, pressuring emerging market currencies, including the INR.
- RBI Intervention: Traders observed dollar sales by state-run banks, likely indicating RBI’s intervention to curb further depreciation.
Sanjay Malhotra’s Appointment
Sanjay Malhotra, a 1990-batch IAS officer and current Revenue Secretary, has been appointed RBI Governor for a three-year term starting December 11. Analysts anticipate his leadership may herald a dovish policy stance, with a rate cut in February’s monetary policy meeting “likely cemented,” according to Nomura.
Broader Currency Trends
The INR has depreciated by 1.3% in the current fiscal year (April-November), remaining relatively less volatile compared to other emerging market currencies like the Turkish Lira and Argentine Peso.
Impact on Bonds
While the rupee faltered, the bond market reacted positively, with benchmark yields falling on expectations of monetary easing. Indian bonds have gained favor, buoyed by their inclusion in JP Morgan’s global bond index.
The coming months will reveal whether Malhotra’s leadership ushers in significant policy shifts, as markets continue to assess global economic conditions and RBI’s stance.
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